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More Chinese Internet giants experience Jack Ma’s pain, bitterly declaring the boom era is over

Tencent Holdings Ltd. pledges to follow the new China model, with closer government supervision amid the slowest growth in history. The group also announced the end of an era that has “nourished” some of the world’s largest and most profitable corporations.

Revenue decreased due to strict management

Co-founder Pony Ma and Chairman Martin Lau supported Beijing’s strict management of Big Tech on behalf of the management. They argue that more regulation makes growth healthier in the long run.

The Chinese government’s strict regulation has far-reaching effects on every aspect of the internet, from e-commerce to online gaming and education. More than a year after the government started this, Tencent and Alibaba Group Holding Ltd. and other competitors have entered a new phase, with expansion and development more cautious.

Like Alibaba, Tencent also just had the slowest quarter in history. Online ad sales fell short of analysts’ forecasts. Its domestic game sales grew only 1%. This reflects the impact of regulatory measures, including licensing restrictions and playtime limits for minors. It reduces Tencent’s largest share of revenue.

Mr. Lau said: “We are proactively embracing changes to better fit the new industry model. We have a long-term oriented corporate culture that focuses on user value, responsibility and accountability. social, technological innovation and regulatory compliance. These are key factors for healthy and sustainable growth.”

The company also dismissed speculations that it will embark on a share buyback plan as Alibaba announced this week. They say they will instead focus on core businesses such as international games, cloud services and messaging services WeChat. They will develop new games for their system when the regulatory environment stabilizes by the end of 2022.

Shares of Tencent fell more than 4% in Hong Kong while Naspers Ltd., its largest outside shareholder, closed 9% lower.

Bernstein analysts led by Robin Zhu wrote in a report: “Tencent does indeed have leverage they can use to improve monetization but remains in ‘hide and wait’ mode. , has raised questions around ‘inaction’ as regulatory discussions (eg fintech) continue. Without more proactive leadership from management, we suspect investors would feel the need to get involved in this.”

Unwilling painting: More Chinese Internet giants experienced Jack Ma's pain, bitterly declaring the boom era was in the past - Photo 1.

Tencent “follows” Alibaba with the slowest quarterly growth in history

Revenue grew just 8% to 144.2 billion yuan ($22.6 billion) in the quarter compared with an average forecast of 145.3 billion yuan. This is the first time that quarterly revenue has grown in single digits.

Tencent has lost more than $470 billion in market value since its peak in 2021, though it has largely escaped direct Beijing’s supervision. The company has supported the efforts of the Chinese government. They say it is better in the long run to curb excesses that have in the past led to disorderly competition in areas such as ride-hailing, e-commerce and food delivery. Alibaba and Meituan are two of the more prominent companies fined for their monopolistic practices over the past year.

Adjust to comply with regulations

Mr. Lau said: “For many years, businesses in the industry have focused too much on competition where the gains and losses are equal, marketing is too bold, expansion is reckless, short-term growth and only focus on the company’s interests. They ignore the most important elements of sustainable growth. As a result, industry growth becomes frivolous and unhealthy.”

Investors are adjusting their approach to the market after China’s leaders pledged to support the economy and the market. Add to that the end of control of the tech sector “as soon as possible” – triggering a historic rally in Chinese stocks last week.

But for Tencent, there are still some unresolved issues.

“Major and regulatory constraints aside, Tencent has its own set of challenges. It hasn’t created its next hot games yet. And ad sales are still on the way,” said Shawn Yang, an analyst at Blue Lotus Capital Advisors. Their reports were heavily influenced by ByteDance’s Douyin (Chinese version of Tik Tok).

As Bloomberg reported last week, regulators are considering asking Tencent to turn its WeChat Pay service into a start-up financial company. It’s part of a massive fintech overhaul that could undermine the appeal of their entire social media business. On Wednesday, Mr. Lau said the company was still negotiating with regulators about the restructuring requirements, adding that Tencent would comply with all regulations.

The freeze on new releases in the world’s biggest games market is entering its eighth month. This rekindled fears of regulatory scrutiny in 2018 that made its most lucrative business. Tencent shrinks.

With regulatory hurdles at home, Tencent is increasingly looking outward. While researching game studios in locations across Europe and Asia, they work alongside Western gaming giants to adapt their favorite titles to mobile games. The latest example is Apex Legends by Electronic Arts Inc. In December, Tencent launched a new publishing division for global markets, with offices in Singapore and Amsterdam.

An investment arm of Tencent – extending funding to companies like Meituan and ride-hailing platform Didi Global Inc. in the past – moved to privatization. The company recently reduced its stake in Sea Ltd. in Singapore and split almost all of the shares of JD.com Inc. as a one-time dividend. This fueled speculation that the company would withdraw from or forego similar investments in the industry.

At the heart of Tencent’s vast online businesses remains the messaging platform WeChat. The app is used by over 1 billion people to do everything from League of Legends purchases to TikTok-style video feeds and meal delivery. Monthly active users on WeChat grew by 3.5% to 1.27 billion during the period. The company’s senior executives say the number of daily active users of the app’s mini-programs has grown by about 12.5% ​​to 450 million in 2021. These mini-programs are mini-services. Free to download in main platform.

Tencent’s senior management has emphasized that they consider the challenges facing the domestic gaming industry to be “temporary”. The company has a large stockpile of titles that are ready to launch when regulatory uncertainties ease. On Wednesday, Mr. Lau said the company expects Beijing to continue to provide new game publishing licenses as the industry introduces measures to protect minors without giving a timeline.

https://cafef.vn/hoa-vo-don-chi-them-ga-khong-lo-internet-trung-quoc-nem-trai-noi-dau-cua-jack-ma-cay-dang-tuyen- bo-ky-nguyen-bung-no-da-la-di-vang-20220326093754341.chn


According to Minh Phuong

Business and Marketing

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